Construction Risk Insurance – What Your Company Needs To Know!

Before starting work on a commercial building project, investors must first prepare by making sure their project is protected. To prevent loss once groundbreaking has occurred, and building begins, it is essential that investors have the proper builders insurance. Construction risk insurance protects investors once work on a project has started, covering any damages or losses that may occur.

Also known as builders risk insurance, property insurance, all-risk insurance, or an installation floater - construction risk insurance covers a construction project against damage caused by any covered perils. Examples of some things this type of insurance protects is damage to building projects prior to completion - including weather damage, vandalism and a variety of other types of destruction that are named in the policy. Policies that cover any and all damage, regardless of the cause, are called “all-risk” policies. Builders risk insurance does not cover injuries or accidents at the construction site since these incidents should be covered by other insurance.

Builders risk insurance may be purchased by anyone with a financial interest in a commercial building project. This includes project owners, investors, lenders, contractors, and subcontractors. A policy can be taken out by someone with an insurable interest in the property, once there is an insurable risk. This means any person or business with a financial tie to a project can take out a policy once the construction project is started. Some contractors will take out a policy before beginning any work, while others believe the property owner or lender should buy the policy. This must be determined in advance, but reputable contractors can frequently get better policy rates when insuring with a company they have purchased insurance from in the past.

When Does Coverage Start and End?

A builders risk insurance policy must be written and in effect prior to supplies and equipment being delivered to a building site, and lasts until the project is either completed, sold, or occupied - or until the policy ends. These are shorter-length insurance policies, and are generally issued in three, six, and twelve month terms, coveing the length of time the building project is expected to last. If a project takes longer, policy extensions can be purchased.

Builders insurance risk policies cover against forces of nature, theft, vandalism and many other perils - provided they are written into the policy. Although most policies exclude earthquake and flood coverage, this coverage can usually be added for an additional fee. While these are all more obvious losses that can occur once a building project underway, there are less obvious losses that can occur as well. These include damage to an existing structure when working inside the building, coverage for increased cost of replacement, and coverage for certain perils and potential risks specifically relating to the project at hand. Coverage may also provide for site security and surveillance, permits and building fees, demolition costs, and other expenses related to a loss. Typically, building permits are not finalized until proof of builders insurance is provided.

Investing in a commercial building project can be extremely lucrative, provided the project is appropriately covered with the proper builders insurance. Unfortunately, losses do sometimes occur, but these losses do not have to mean the end of the project. The right construction risk insurance coverage ensures a building project can continue - right up to its glorious completion!